Will be profitable by 2015; CFO on personal leave: SpiceJet

On reports of the chief financial officer Neelakantan R quitting the company, Kapoor says the company CFO is merely on a personal leave and hasn’t left the airline.

Meanwhile, auditors SR Batliboi and Associates LP in a note had raised concerns over the airline's survival, as it continues to remain in red. The note read: "The company's total liabilities exceed its total assets by Rs 1,460 crore. These conditions along with other matters, indicate that the existence of material uncertainty may cast significant doubt about the company's ability to continue as a going concern.”

Kapoor, however, dismisses these concerns quoting them to be merely technical in nature.

"It is a technical observation, when the liabilities exceed the assets and that is solved by recapitalisation. So, when the recapitalisation process is complete we will announce. This observation will go away when we announce something," he adds. Below is the edited transcript of Sanjiv Kapoor’s interview to CNBC-TV18’s Latha Venkatesh and Sonia Shenoy.

Sonia: What are the efforts by the company that have led to the reduction or the narrowing of losses this quarter?

A: Fundamentally, there are two things. The first one is that we have to do everything possible to increase revenues and make sure we don’t fly empty seats around. Ultimate perishable commodity helps nobody to fly empty seats.

Second is relentless focus on cost. So, we are working on both and as a result it is still work in progress but we have achieved a reduction of 45 percent of losses and this is purely on operating basis. There is no benefit of financing activities in our loss reduction. There is no aircraft sale lease back or engine lease back. This is pure operational improvement.

Latha: It will be quite a wait before you turn operationally in the black I would assume. When do you see that happening and in the interregnum are you preparing for money in some quarters, some equity money?

A: In terms of when we will be back in the black, we hope it will be in calendar year 2015 that will be the year where we can look back and say that is some SpiceJet turnaround. It cannot be more specific than that but that is the trend we are heading towards, that is what we are working towards.

In terms of capital obviously there is a need for recapitalisation and that has been worked on. So, when we have something to announce on that at the appropriate time we will make the announcement.

Sonia: There are lot of news reports about continuous churn that we are seeing in the management. Is it true that the CFO has quit the company?

A: No, R Neelakantan is on a personal leave, he is part of the Sun Group, the parent company, so it is inconceivable that he would quit the company. But for whatever reason,  when people in the airline industry go on leave or there are any changes, it seems to make news. But it is pretty routine like in any other company.

Latha: There are other issues with the airline industry itself especially after the unsavoury experience of one big guy who just imploded with small incremental news of people leaving. We also hear that quite a few pilots have left, almost 40 pilots, is that true?

A: Pilots moving on is a fact of life in the Indian industry. All of us lose pilots to the Gulf carriers, foreign carriers and sometimes to each other. So, we plan for that and the departures have been over a period of time, so it is nothing out of the ordinary really.

Sonia: How much of your capacity have you reduced in the last three-six months because that would have helped lower your operating cost as well?

A: Actually that is a misconception. The best measure of operating cost is cost per available seat kilometres (ASK). If you reduce capacity- that’s ASK, that is a denominator, your cost goes up. We actually increased capacity in the last quarter for which we just declared results by 7 percent. I don’t know why there is a misconception that we will reduce capacity. We have reduced some aircrafts but we are flying the remaining aircrafts much harder and we have infact increased capacity to reduce cost.

Latha: What relief will you get from the falling fuel prices?

A: Significant relief. Even the existing decrease of about 10 percent since October will reduce it by over Rs 300 crore. And it is only part of the relief that we are hoping will be passed away. Fuel price, globally, has fallen 17-18 percent. We have only seen a 10 percent reduction and that is on the base fuel price.

On top of that we are hoping further aviation turbine fuel (ATF) taxes, rationalisation, reduction and that can significantly positively impact the industry and help us. We really need the help. This industry is a critical industry and structural costs are very high and this kind of relief is needed for the industry to be healthy.

Latha: What have been your load factors since October the official holiday season for India?

A: For October we have filed our data with the DGCA, so we are not permitted to reveal the numbers. After the DGCA puts it out they should put it out today.

Sonia: It has been three-four times that the auditors have raised concerns over the survival of the company. We just read about SR Batliboi again saying that the total liabilities have exceeded the total assets by Rs 1460 crore. Should we be concerned about the survival of the company?

A: That is a technical observation that has been made on us and also for some other listed airlines for the last three years. It is a technical observation, when the liabilities exceed the assets and that is solved by recapitalisation. So, when the recapitalisation process is complete we will announce it when we have something to announce at the appropriate time, that observation will go away. They have been making this observation from last 11-12 quarters, we are working on it. As soon as we have something to say we will make an announcement.Posted by: Ritika Dange